Today’s topic of discussion is a way to have an income in old age.

What is NPS ?

Earlier it was thought that only if we were in government service we would get a pension.To remove this misconception, Indian government launched a pension scheme which is for everyone, and the name of the scheme is NPS. The full form of NPS is the National Pension Scheme.

How to enroll in NPS?

You or your employer can open an account in NPS for you.Then you can invest in your account regularly. You can invest in NPS account up to 60 years of age.If you wish, you can increase it up to 75 years.After 60 years, you can withdraw 60% of the total fund.Remaining 40% will be used for pension creation. You can also take 100% of the fund as pension, if you want. After your death your life partner will continue to receive the pension for the rest of life.

If you already have a good savings and want to invest for good return, read this article where i talked about Mutual Funds:

How to Invest in Mutual Funds in India (2024)

Types of NPS Accounts:

There are two types of accounts:

1. Tier 1 Account
2. Tier 2 Account

Tier 1 Account

Tear 1 account is compulsory, means if you want to enroll in NPS you have to open this account first.
Fund withdrawal is not possible before maturity.
Fund withdrawal will be possible after 60 years of age.
There are advantages of income tax in Tear 1 Account for everyone.

What is a Tier 2 Account?

• If you have Tear 1 Account, then you can open Tear 2 Account. Money can be withdrawn from Tear 2 Account as per requirement.

Tax benefits:

There are some benifits in old income tax, but the new regime does not have many benefits.

Who can open an NPS account?

• You must be an Indian citizen.
• Your age must be between 18 and 70.
• Even NRIs can open an account.

Account-related information:

• Account can be open from any recognized bank. After opening an account, you will get a permanent Pension Account Number (PRAN) which you need to keep safe. You can change bank as per your wishes. One person can open only one account.

Minimum Investment:

• You need minimum 1000 rupees for invest in Tear 1 Account.
  There are no minimum limit of Tear 2 Account. But account must be deactivated if there is no investment in between 1 year. In this case, account must be activated by depositing the due amount.

Asset Classes:

There are three types of asset classes you can choose from:

1. Asset Class E = High Risk & High Return
2. Asset Class C = Medium Risk & Medium Return
3. Asset Class G = Low Risk & Low Return

This is a personal matter.

Return and Maturity:

Though it is controlled by the Government, the return of NPS is not guarantee. But, premature exit is possible after 10 years. You can wothdraw your fund under certain conditions. If you nominee will be get the money if you are dead.

Pension:

You can withdraw 60% of your fund at the end your investment period and the remaining 40% will be returned as pension. There are many Pension Schemes. You can nominate maximum of 3 persons as nominee. If anything is not clear, then please ask, we will discuss about this, we will publish a writing on it.
NPS is a great option for safe and sure future, which will provide financial security to you and your family.